Only one person in the room.
Yeah. We just do that. Is that cool?
This is pretty, this is pretty great.
All right.
Four. Three. Okay. All right. According to my Casio, it is 10:00 A.M., so we'll get started. I'd like to introduce our next presenter here at the Planet MicroCap Showcase Vegas in partnership with MicroCap Club. We have Joseph Thompson from KITS.
All right. Good morning, everyone. You know, over seven out of ten adults require either glasses or contact lenses to get through the day. We started KITS just over six years ago to make the whole process easier. We set out to make eye care easy. It's worth it to fix this category. It's about $70 billion, and our hypothesis, as we set out, was that with vertical integration, we could cut 90% of the cost, really 90% of the waste of making high-quality eye care, and pass that on to customers. You know, with the convenience of online, you could 10x selection, and we can make goods and ship them in a day. That points to our North Star metric of Net Promoter Score and really maintaining 80-plus Net Promoter Score.
You know, as we've built KITS, the market seems to be building to us. The millennial consumer is now, as of last year, the biggest demographic in the U.S., about 75 million individuals in the U.S., about 8 million in Canada. This year, this millennial cohort is in prime optical age, about 28 to 45 years old. Using contact lenses, using single vision, coming into digital progressives. This cohort's very unique. They've got very high expectations. What they've told us as we started the company is, "We've no desire to get into our car or Uber and, you know, drive to a LensCrafters store, you know, pay $300-$400 for a pair, off of a limited selection on the shelf, wait two weeks to get them.
We wanna press a button, we wanna get it in two days. And, you know, we want this, we want any company we work with to make it right. It's a high bar, but if you can hit that bar, this is a customer that'll come back again and again. This will be the category for the next 10 to 20 years, this millennial cohort and Gen Z, similar, similar characteristics right behind them. This is really what we've been building towards. Six, just over six years in, you know, how are, how have we been doing? We've had, you know, we pre-announced Q1, so it's up here. We'll have the full announcement in a few weeks to the market. We've had about 10 quarters in a row averaging in and around 35% organic growth, and continuing to build.
As we think about results, we're focused on delivering results up and down the balance sheet. You know, results on the top line have been strong. You know, five-year CAGR about 35%, consistently growing. If you think about our business, we launched it in late 2018. We had a boost of customers coming online during the pandemic. We took the company public in January 2021 on the Toronto Stock Exchange. We used 2021 as an investment year to build out our optical lab, to build out our glasses line, to build out our infrastructure. We have been benefiting from that leverage and that scale and that moat ever since. You see, you know, you see the results on top line. Profit or adjusted EBITDA has been continuously improving. In Q4, we were about 6.5% adjusted EBITDA.
We've pre-announced we'll be higher than that in Q1 and expect that to continue. And then generating cash flow from operations. You know, as we get more scale, we're getting more leverage on the model. So about CAD 13 million cash flow from operations in 2024. And the magic in this category is once you need vision correction, you need it for decades, often a lifetime. And so, that number in the bottom right, 63% of our revenue in 2024 came from repeat customers. And that's even as we were growing organically 32% last year. You know, this category can be very almost software-like with its annuity stream. So easy, right? Just find a category that hasn't been disrupted yet. Optical really hasn't had its online or its mobile moment yet. You know, introduce some innovation and just grow.
You know, there's a reason so few companies have been able to get to scale in this category. There's so many component pieces of this category. It's a manufacturing category. You have to design glasses at scale. It's a fulfillment company. It's a huge technology company. It's a marketing company. There's so many pieces. You really need scale to get leverage on the model. You can't, in this category, in our view, be a 20, 50, even $100 million company and really make a dent in this category. For us, we're focused on three things to keep this momentum going. Number one is our foundation. We call this our $500 million foundation. It's our giga lab. We have an optical lab onshore here.
We built it to scale, well ahead of the capacity that we're using today so that we can grow into it. And it's the machines. If you haven't, if you, and I see a number of folks in the room that have been to our facility, and if you haven't and you're in Vancouver, come, let's do a tour. It's worth it. You'll never look at glasses the same way again. You'll make your own pair of glasses in the lab. It takes about 20-25 minutes. And then, you know, and then it's, you know, comes out the other side ready for the carrier network to pick up.
It's the lab, it's the conveyors, it's the machines, it's the automation that we built into it, but it's also all the data and technology that we've built, multiple layers of technology on top of those machines so that when a customer places an order on kits.com, you know, five minutes later, it's rolling off the printer. An hour, two hours later, it's made. Your prescription glasses order is made, waiting for the carrier to pick up. You know, we were having this conversation with someone the other day about the website. We built it, you know, it's all built from scratch. We built the technology ourselves, customized for optical.
And we said, you know, if someone were to scrape our site and rebuild it and copy it pixel for pixel, you know, in a week, we would outperform whoever did that because we're getting over 10 million unique data points every day with the volume that we're processing through the site. And so we're making constant tweaks and constant iterations on the model. Oh, customers are getting stuck in this one little place. Let's introduce some new technology. Let's fix it. Our deliveries are taking a little bit longer than normal just outside of Chicago. What's driving that? Let's get in there and fix it. It's a combination of a hundred, a thousand, ten thousand micro improvements that just extend the moat. We call this our 500 million foundation.
We're, you know, currently, you know, expected to be in and around $200 million revenue in 2025. We think that there's capacity, within the infrastructure, within the CapEx that we've already deployed, to grow to at least $500 million in revenue. Now comes the fun part where we get to grow into that. The second thing is our unique approach to growth. Our mentality is that the best invention, the best creativity comes from scarcity. We cap marketing as a percentage of revenue at sub 15%, even as we've been growing over 30% over the last couple of years. That really forces the marketing team to think differently. We can't just, you know, plug money into the Facebook machine or the Google machine. We, you know, for us to grow, we have to find new ways.
A couple examples of this include promotions like First Pair Free. You know, our team looked and said, "Okay, to acquire a customer on Facebook or, or, you know, a comparable property would be $100-$200." The total cost of goods sold to make a spectacular pair of prescription glasses in our lab, the frame, the prescription lens, the labor, the shipping all in is sub $25. What if we use that cost of goods sold advantage as a marketing tool? We run promotions like First Pair Free, where if you've never made a purchase on kits.com, we will give you your first pair of prescription glasses absolutely free. We will make the first move because we're so convinced that once you try KITS, you'll become a customer for life. Customers do not really believe this.
They see the promotion, like, you know, nothing's free. You know, there must be some catch, but they see, you know, these millennial consumers, Gen Z consumers, they see the chatter online. You know, I've tried it. It works. They give it a try. Hundreds and hundreds of thousands of customers have tried this. And, you know, that's really where the magic happens, from our side. Our team gets the order. The customer places it. Okay, it's a free pair of prescription glasses. You know, let's see what happens. I place my order, you know, in a month, two months, something will arrive from some, some part of the world far away. Let's just, you know, let's see what the quality is like. Our team gets moving. You know, they've got those glasses made in an hour or two.
They're flying east from the West Coast at the customer's door in a day or two. The customer opens their door and they see this KITS box and they're like, "No way." You know, I paid $350, $400 for a pair of prescription glasses. It took two weeks, three trips to the glasses store. You guys gave them to me for free. I love them. They got there in a day or two. What's the catch? You know, our team just says the catch is tell everyone you know. As a result, the customers really become, every customer that we have has become an influencer for us. You know, there's other promotions that have kind of come out of first pair free. Influencers are a big driver.
Within influencers, we saw pockets of orders and little movements being formed where these influencers were located. The team said, "Huh, that's interesting. What if we go town by town?" As opposed to spending, you know, marketing dollars coast to coast, let's isolate on one community. It's really a mathematical exercise. How many millennials, how many people are in a city? 5 million. How many millennials, you know, plus or minus five years? Okay, call it 2 million. How do we reach those 2 million people that are our target market in a city, say Chicago? Let's put surge advertising in one market for two to three months and let's spike awareness, let's spike trial, let's spike traffic, and then we'll go back to sustained levels. We can, the team can tweak what worked, what didn't, go to the next market.
and then the retention team comes in behind, make sure that those customers are coming back for a subsequent purchase. These are all, you know, examples. There's, you know, there's many others, where scarcity, and really capping marketing as a percentage of revenue has sponsored creativity. It's worth it in this category because, you know, and this customer, when they come back, it's a beautiful thing. We're seeing, you know, over 60% revenue from repeat customers every year, and even as we're growing. You know, there's other initiatives that we have, insurance initiatives. We have Autoship. We have a KITS+ membership, more to come. All of this around this second bucket, which is a unique approach to growth as we grow into the CapEx we've already deployed.
The last area is making sure that we're delivering shareholder value and constructing the company, and our financial system so that we're delivering shareholder value, as much as we're delivering consumer value. You know, if we, we've been around for just over six years now, you know, I see some folks in the room that, you know, heard us talk six years ago as we were starting the company. The story has not changed. Six years from now, if we're here, you know, presenting at this conference, it's gonna be the same story. Number one, focus on organic growth as a key driver. As this market moves online, as the millennials become the biggest part of this category for the next 10 to 20 years, we're not gonna run out of market share. Let's focus on organic, revenue growth.
Number two, do the hard work first. When we started, we started with a smaller category, contact lenses. People say, "Why are you starting with contact lenses? That's not a sexy category." Glasses is much bigger, four times the size, much sexier. You're designing, it's marketing, it's really cool. You know, contact lens is just a commodity product. Well, underneath that is the most valuable part of the category, a young fashion-focused consumer that comes back every three to six months. We started, built a profit core, vision-corrected customers in contact lenses. Then we built a lab before we sold our first pair of glasses because all of the profit and the reason why prescription glasses cost so much money is that the lab is largely outsourced.
As opposed to passing on that cost to customers, we put, you know, multiple millions of dollars into the first version of our lab before we sold our first pair of prescription glasses. Go public early. You know, we went public a couple of years after we launched with a full-form IPO on the Toronto Stock Exchange. It takes a little while. I can tell you I was definitely not perfect in our first years of public company, but, you know, we're starting to, you know, really find our feet now. Do the hard work first, invest in long-term channels. Don't invest in, you know, growth hacking, a specific, you know, Google initiative.
They change the algorithm and then, you know, you're back to square zero, you know, after six months. Invest in the customer. That's who's gonna spread the word. Take a non-dilutive approach. We've done one equity raise in the company. It was the IPO. We're, you know, we're open to use debt. We're focused on taking a non-dilutive approach as we continue to build this company. Results help on the top and bottom line. We've seen that, you know, come through consistently. We pre-announced Q1. We'll announce full results in a couple of weeks, but, you know, anticipating to be another 35% organic growth quarter, and over 7% adjusted EBITDA. You know, often forgotten, especially with consumer companies, is a focus on working capital. That's near and dear to our hearts.
You know, growth is great, but it can eat all your cash, you know, in the form of marketing spend, inventory, and CapEx. We have been really focused on tightly controlling all three of those areas. I mentioned CapEx has been deployed. We will not need significantly more CapEx to grow this company. We keep a tight control of marketing as a percentage of revenue, and we're obsessive about inventory turns. As a result, you know, we had a debt balance with the Business Development Bank of Canada, you know, almost fully paid that off now, while keeping cash flow consistent. This will not be the case every single quarter, but over time, you should expect us to get more efficient as we grow. You know, we break out our financial statements in terms of fulfillment, marketing, and remaining G&A.
Over time, marketing will, you know, probably be around flat, and then we'll bend down, and fulfillment and G&A will be the same. You know, we've been thrilled with the support that we've gotten, particularly the last couple of years from the market. We have seven sell-side analysts covering the stock. They've been great supporters. We had a bit of a pullback on the stock for a brief period over the last few months, kind of December, January, and February. It's largely corrected itself, and it was a great opportunity for us to get some institutions in who had been really following the name and were anxious to come in to the stock. Last, you know, and certainly not least is the team. Roger and I started KITS just over six years ago.
Roger has a rich history in optical. He previously started a company called Coastal Contacts. It sold for about $430 million in cash in 2014. It was NASDAQ listed. We have a team, Eve's here, who is CFO of that company, runs finance for us now, and we have a team with decades of experience in optical. It's really important to have industry experience in this category, e-commerce and technology experience as well. Why don't I stop there, see if there's any questions from the group. Sure. I think it is reasonable. The question is, you know, five-year EBITDA, some of the top performers in the category have upwards of 20% adjusted EBITDA. You know, currently we're at around 7%. You know, our view is that it's not formal guidance, it's just our internal targets.
Our internal targets, you know, for within the next two years are to be about a $250 million revenue company, and north of 10% adjusted EBITDA. Over five years, you know, if our growth continues at a slightly slower rate than currently, down to about, you know, 22-23%, we expect to be a $500 million revenue company. I would expect that we should have adjusted EBITDA within five years of 15% or 15-20% or even a little bit higher. We've got really tight control of all the dials and, you know, we're just watching growth and profit, making sure they're both growing. We like this, you know, this software metric of the Rule of 40. We love it, even though we're a consumer company.
We're trying to, you know, stick to that as much as we can quarter on quarter. We think 20% is very reasonable in over the next five years. You, you nailed it. There'll be three things that we think will drive both gross margin expansion and profit expansion. Leverage will be a part of it, and it has been, as you saw from the slides, but increasingly, we will have pricing power. We're currently charging $38 for a pair of prescription glasses, including prescription lens, which is very disruptive. For us, you know, that investment in a lower gross margin than the industry has is part of our awareness build and helps, yeah, helps fuel this low marketing cost 'cause people can't help but spread the word about it.
You know, could we take that pricing from $38 to $48 or $58? Absolutely. The third part of that is the repeat customer, which you mentioned. Typically what we see is first-time customer will come in, "Okay, I've heard about it. I've seen the reviews. You know, let me give it a shot." They don't do a lot of upgrades. Maybe they spend $50, $60 on their first purchase, and then they wait and see. Insurance underwrites a big part of this category. Most, about two-thirds of North Americans have some form of vision insurance, and it's typically, you know, in the $300-$400 range every two years. You know, no coincidence, that's why glasses cost $350-$400.
The industry has perfectly mapped the price of one pair of glasses to the amount of insurance that most customers get. It has nothing to do with what the cost of delivering high-quality glasses are. You know, the benefit for us when we see these recurring customers come back after three or six months for their second pair, it becomes a treasure hunt because they've got, you know, $200-$400 of insurance to spend. They've only spent $50. Now we have customers coming back saying, "Well, I've always wanted a pair of prescription sun. I've always wanted that, you know, that red pair, that big red pair of glasses, but I couldn't buy them if I could only buy one pair every two years." It will be a combination of leverage, pricing power, and then increased margin and gross margin on repeat customers. Sure.
It's a simple sales channel. We're all, we're online only. We've got one store. It's more of a showroom in Vancouver right on KITS Beach. Our channel is direct to consumer. Our biggest, the biggest, you know, we participate in some of the platforms you could imagine, mostly, you know, Google and a little bit of Facebook. Really, you know, we leverage influencers and consumers to spread word of mouth. Influencers and affiliates are far and away our biggest channel. We love influencers because influencers are hesitant to promote something if they don't think their followers will benefit from it. You really have to be willing to put your whole offering on display and have it be judged, you know, for better or for worse.
You have to give up total control on how it's communicated out to the market. We love that with our model. That's been our biggest channel. It's very simple. We have a design team in Vancouver. We source raw materials. We assemble, make the glasses on the West Coast in our lab, and we deliver them to customers. That's it. It's revolving. It will be in some areas at different times. We're currently running it in Canada, and then we will pulse it into different markets. We're just getting data constantly.
The data's helping inform us, "Hey, this promotion, this language worked, you know, when we roll this out to the Northeast in the U.S., let's do it this way." I believe it is currently running in Canada, but, you know, plans to expand that continuously. Okay. Yes. Sure. Contacts is still, we started with contact lenses, still the biggest part. The benefit of contact lens users is 100% of them also need a pair of prescription glasses, even if it's just to give their eyes a break for a day. We have a lot of overlap on contact lens users also buying glasses as we launch prescription glasses. Contact lens is still the balance of our revenue. Glasses is growing much faster, you know, much, much faster than contact lenses as, off of a smaller base.
As we think about kind of two or three years down the road, it'll still be majority contact lenses. Those customers just keep coming back and have, you know, a spectacular LTV. But it'll probably migrate in around 60-40 contact lens, glasses over the years. Unit economics, on the glasses side, much higher gross margin. So contact lens is typically kind of 35-45% gross margin. You know, glasses is often, if you look at peers in the industry, you know, often 70-80% or higher. And so we're not at that level, but, you know, but certainly, glasses will be gross margin accretive as we grow that business. Yes. Churn and spend by cohort, absolutely. This is the power of the online business.
Previously, I was, you know, before we started KITS, I was at Amazon, and you just saw the power of this data and the moat that that allowed. We are obsessive about those, those, measuring. We, it's not something that we make publicly available, but we look very, very closely at churn, and by cohort. What we're seeing is, you know, where we have, just maybe to share a little bit of insight, where we seem to have the best opportunity to add value to customers is increasingly on more premium parts of the segment because the value delta is so significant on what you'll see on brick and mortar.
For example, daily modality contact lenses, the contact lenses you replace every day, very high value delta, and a great LTV customer is coming back every three to six months. We've increasingly, you know, focused on that specific cohort within contact lenses. We're seeing digital progressives, which is, you know, a smaller part of our glasses business. Those are the lenses where you have two or three prescriptions within a lens. The value delta is so significant. Those typically cost $800-$1,000. You know, on kits.com, it's under $200. For a customer, even a customer that doesn't want to shop online and prefers to go to a store, for an $800 savings, it's worth it. Yes is the answer to that. We're looking at that very carefully. Churn's getting better. Yeah. I'm being told we're done. We'll be around. Thanks, everyone.